State COMBAT audit hits Jackson County for bad real estate deal and loose oversight
It was a lopsided real estate deal that squandered tax dollars, as Missouri State Auditor Nicole Galloway describes it.
In August 2017, Jackson County legislators approved the sale of a building to the Independence school system that became the district’s arts and technology center. The county’s own assessment department said at the time that the former My Arts program headquarters was worth upwards of $560,000 and, had it been rented out, might have produced $1.6 million a year in rental income for the county’s program to fight illegal drug use and violent crime, commonly known as COMBAT.
But $10 is what taxpayers got instead for a building the county had spent $1.2 million to renovate for a federally financed youth program that went kaput.
That’s among the more damning highlights of a long-awaited state audit of the COMBAT program, released Wednesday, that also detailed a number of other ways COMBAT funds have been misspent.
But Galloway alleged no criminal wrongdoing and offered few surprises, other than some previously unreported details of the controversial My Arts building sale that saw the COMBAT fund take a costly, self-inflicted hit.
That’s because Galloway’s audit largely mirrored findings of the private accounting firm that Jackson County Prosecutor Jean Peters Baker hired in late 2018 to review the drug and anti-violence program she now oversees. Baker released that report on COMBAT last fall..
One thing it didn’t do is discuss the My Arts deal. But both reviews of the program’s books concluded that COMBAT sales tax funds were misused, although not criminally, during the two-year period reviewed.
Like the earlier report, Galloway’s calls for tighter controls and greater oversight to ensure proper spending of the $23 million that the quarter-cent Community Backed Anti-crime Tax brings in during a normal year.
“The COMBAT Fund was created to help protect the safety of the citizens of Jackson County, and it’s vital that these resources be managed effectively and appropriately,” Galloway said in a prepared statement. “My audit has found several areas for improvement, and I urge county officials to take action on the recommendations in this report.”
Galloway is a Democrat running for governor against the Republican incumbent, Gov. Mike Parson. All but two members of the nine-member Jackson County Legislature are Democrats, as are the county executive and county prosecutor and sheriff.
In separate written responses dated last month at the back of the 48-page report, Baker, County Executive Frank White and Theresa Galvin, the Republican chairwoman of the county legislature, all thanked Galloway for her review and promised to follow the recommendations that apply to them.
Baker said she has hired staffers who are responsible for evaluating how COMBAT money is being spent by agencies that receive it.
On Wednesday, she and COMBAT director Vince Ortega issued a statement inviting anyone who wishes to report alleged mismanagement or improper use of COMBAT funds to call 816-881-4337, or fill out a form at jacksoncountycombat.com/whistleblower. Tipsters can do so anonymously.
Galloway said her audit was partly based on the financial analysis by the accounting firm BKD LLC, which Baker hired to review COMBAT’s financial reports for 2017 and 2018. Her staffers spent a year looking at COMBAT as part of a wider review of county government.
Reports on the county’s budgeting and procurement processes are expected before the end of this year, Galloway’s office said. The county is paying for the audit, which the legislature requested and White suggested in the midst of a dispute over control of the COMBAT budget.
The report took aim at the county executive for his administration’s use of COMBAT tax money to pay for salaries and expenses of county officials who Galloway said did not appear to be directly involved in furthering the program’s aims. White’s administration and that of his predecessor, Mike Sanders, ran COMBAT for a decade. Then in early 2018, county legislators, unhappy with White’s management of the program, returned responsibility for it to the prosecutor’s office, which had overseen COMBAT from its inception in 1989 until 2008.
Voters ratified the legislature’s action in the fall of 2018, after White lost a court challenge trying to block the move.
Like the earlier report, Galloway questioned the appropriateness of COMBAT funds going to pay for part of the purchase price of a pickup truck used exclusively by White’s chief of staff, Caleb Clifford.
“Documentation was not maintained to support how this purchase related to the COMBAT programs, making it unclear if this expenditure was a proper use of COMBAT funding.”
In his defense, White wrote that the transaction was OK’d by the county counselor’s office.
The legislature also came in for criticism for failing to review how COMBAT money is divided among various agencies. Those percentages haven’t changed in 25 years, despite a now decade-old modification of COMBAT’s mission. Voters decided in 2009 to add fighting violent crime to the original focus on illegal drug use.
The audit also faulted the legislature for failing to adopt policies requiring recipients of COMBAT funds to justify how they use the money and measure the effectiveness of their programs.
About 34.5 percent of the COMBAT budget goes to law enforcement, the prosecutor’s office and drug court; 27 percent to the circuit court and corrections departments; while most of the rest goes to prevention of crime and treatment for drug offenders.
The audit also questioned the county legislature’s past use of COMBAT money to fund outside agencies whose requests are not subject to review by the COMBAT commission, made up of unelected appointees who set goals for the program and evaluate funding requests.
“The contracts awarded to one outside agency by the County Legislature, totaling $120,000 during 2017 and 2018, were not in accordance with the purposes indicated when the sales tax was passed and are a questionable use of COMBAT monies,” the audit said.
That outside agency is not named, but the previous report questioned spending in that amount to support the Martin Luther King Jr. celebration put on by the Southern Christian Leadership Conference.
The My Arts real estate transaction was not addressed in the 41-page BKD report posted on the COMBAT website, but has been previously reported. The program, originally headquartered in the Crossroads Arts District, was moved to Independence after the county bought a former auto dealership for $1 from the city of Independence. The county legislature agreed to spend $1.2 million at the end of 2010 to renovate the building near Independence Square.
Former legislator Dennis Waits of Independence led that move and also was the main backer of the proposal to sell the building to the school district after Baker lost federal funding for the art program to help at-risk youth.
White opposed giving the building to the schools when it might have been used for other county purposes, the audit said. But at a meeting of the finance and audit committee that Waits chaired in August 2017, the $10 sale was recommended for final approval by the legislature.
No independent appraisal was ordered ahead of time, and Galloway said she doesn’t know if the legislature was aware of the building’s assessed value or the potential rental income it might produce. Galloway could find no documentation to prove they did have the information, but the county executive’s staff had those numbers and lobbied behind the scenes against the sale.
Still, Galloway said the legislature should have acted with less haste.
“It would have been fiscally responsible for county officials to analyze and consider all available options for repurposing, renting, or selling this building,” the report said. “Since the County Legislature did not document an analysis considering all available options prior to this sale, there is less assurance this decision was in the county’s best interest.”
White responded to the report by saying he “still believes that the sale of the building was both imprudent and improper.”
Baker said she had no direct role in the decision to sell, but added that maintaining the empty building was a $50,000-a-year burden on her budget. Galvin did not address the issue in her two-paragraph response to the report.
She and former legislator Garry Baker were absent on the day it came up for a final vote. Legislator Crystal Williams expressed skepticism of the sale at that day’s finance and audit committee meeting, but voted with the majority when it was placed on the consent agenda and passed 7-0.
The legislative record for that day said the sales price was $1, but the sales contract was for 10 times that.
No one at the meeting that day mentioned the $9 discrepancy.
This story was originally published April 15, 2020 at 10:00 AM.
